Four Myths of Rising the State Pension Age in Poland

Polish government began public consultation on the rise of the state pension age in February. It provoked a national debate about how long the Polish will work. There are numerous arguments for and against the reform. Some of them are just and other are demagogic. We should select them and consider issues which are important for us – future pensioners. It is essential because the reform is unavoidable and most members of the European Union have already risen their state pension age. Polish state pension age for women is the lowest in whole European Union. It must be changed. Why? Let me answer this question by exploding four common myths.

photo: desbyrnephotos

First myth: Polish government rises the state pension age to reduce national debt.

Polish government will not derive benefits from the rise of the state pension age. Firstly, it will not generate any substantial profits during the current term. Polish pension scheme is based on the assumption that the amount of pensions depends on the increase of payments and the number of workers. Having taken this into consideration, the amount of pensions would increase if people retired later. The net effect, however, will not be great. Polish pension fund will save no more than 0.2 billion PLN a year. This is just 0.2% of annual expenses on pensions. Savings between 2013 and 2015 will not be far greater. They will amount to 0.3% of the public expenses. Secondly, the majority of citizens is against rising the state pension age because they suppose that they will not be able to work so long. It proves that the rise of the state pension age will be unprofitable for the government, which may fall from power as a result. So why the government struggles to introduce the reform?

Second myth: Low state pension age does not influence the economy.

Imagine that it is 2040 and no previous government decided to rise the state pension age owing to strong public resistance. People who are 38 nowadays will have been retired for 7 years and the majority of them will be physically fit as well as mentally handicapped. As a result of a population slump, there will be one worker on one pensioner, which means that employees will have to provide for themselves and at least one retired person. Having taken this into account, we should consider how much money will our children and grandchildren allot to our pensions? Will it be 20% or 30% of their average payments? I suppose it will not be much more. It will cause a generation gap. Young people will not be able to provide for long-living pensioners over 60, who will not make ends meet on their own because pensions will amount to 30% of an average payment. Apart from public resistance, this will lead to an economic recession as nobody, neither pensioners nor workers paying high taxes, will afford to buy more and more commodities. It can be safely concluded that the reform of the pension scheme is unavoidable because both we and our children may find ourselves in a difficult situation. Moreover, if Polish government rose the state pension age now, the reform would not be implemented right away and the citizens would not be wronged. The increase of pensions will be an additional advantage. According to the calculations of Polish government, the pensions of women who are 38 nowadays will rise as much as 72.4%.

Third myth: The rise of the state pension age will contribute to the increase of the unemployment.

The public debate on the rise of the state pension age is accompanied by the fear that the unemployment will increase. It is the result of the tricky situation of people over 50, who encounter severe difficulties in finding a job because employers prefer younger workers. Nevertheless, we should take future changes into account. Let me mention some statistics. The number of people who look for a job will be gradually decreasing since 2015 due to a population slump. If the reform of the pension scheme is not introduced between 2013 and 2040, there will be a labor shortage amounting to 2.4 million, which is 15% of current employees. This will contribute to a fundamental change on the market. Instead of looking for work, employers will encourage us to accept a job. We will not compete with the younger generation. Even if the reform is implemented, there will be more citizens approaching retirement than young people who have just begun work. The majority of people whom the reform concerns will find a job.

Fourth myth: We will not be able to work over 60 because of poor health.

Progress in medicine lengthens our lifespan more and more. One should not consider the health condition of people being now over 50 and 60. Medical care was worse when the older generation was at our age. Having taken this into account, we are far more likely to be able to work longer. Moreover, technological progress makes life easier for blue-collar workers. More and more work is done with the help of machines. It can be safely concluded that the jobs of most employees are less detrimental to their health than several years ago. We should also remember that nearly half of the Polish will be over 50 in 2050. More workers will be over 50 then. A 60-year-old policeman or a 50-year-old cashier undoubtedly will not be a surprise. That will be a completely different world.

PhD candidate and Assistant in the Warsaw School of Economics in Warsaw, economist of Kredyt Bank. He cooperated with World Bank and Foundation FOR and was a recipient of Ronald Coase Institute's scholarship.